4 ms·
I was pointing to something else, landlords have advantage as they can borrow money using (10x) leverage created on cash-flow, in that way landlords do not use
by NiceWayToDoIT 5y ago
I was pointing to something else, landlords have advantage as they can borrow money using (10x) leverage created on cash-flow, in that way landlords do not use "their own money" but operate on huge debt. Crude example is that for your mortgage bank will shake last penny and do XX number of checks, and then you will pay that money as your major expense paying with your salary. For you home is not an asset, it will become asset only when you pay it out, until then it is expense a burden, so for you debt is bad thing. For landlords on the other hand debt is good, as more debt they have more properties they have and they can create larger cash-flow. While you pay huge taxes on your salary 40-55%, landlords can pay no taxes at all as they are constantly in debt. (Trump's way) But government cannot do anything about it because if they do something crash will be worse than the 2008 one, any new policy could impact landlords with portfolios in billions.
Now, if they are in debt how they make fortunes someone may ask?
Property prices grow with time, and with different loopholes if you mass let say 100 properties over 10-20 years, and then you sell only ten you will probably get out money enough to pay out initial debt of first 50. (figures are rough just to get point at least in London they are very close to true figures). Also it is worth mentioning, that cash-flow is paying salaries, expenses, dividends ... and there are multiple other known tax loopholes how to get the money out ...